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Report on Max Wrench’s Business by Gerald Sim & Partners

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Introduction

Report on Max Wrench's Business by Gerald Sim & Partners The major causes of small business failure are neglect, fraud, poor management and disaster. Of these, the most significant is poor management. (Wade, M. The Accounting Framework. Australia:1988. p109). For the case of Max Wrench, an accounting system is very much needed to be put in place. Firstly, it is essential to calculate the current value of his assets, liabilities and owner's equity so that he can apply for a mortgage on his assets. More importantly, as Max is looking into expanding his business, it is of utmost importance that Max has the help of a good management accounting system, to help him asses the position of his business at all times and take necessary actions. Lastly, like every other business in Australia, Max needs a financial accounting system that is of acceptable standard. Management Accounting There is no legal or statutory requirement for any business to prepare management accounts nor are there any rules regarding how these accounts should be presented. ...read more.

Middle

The balance sheet may also be supplemented with: o Comparisons with prior year budgeting o Detailed analysis of key matters such as aged debtors, fixed asset purchases and sales, or pressing liabilities or fixed asset purchase commitments. * A cash flow statement for the period to date * A written commentary on significant features such as unexpected trends or variations from the budget In order to prepare accurate management accounts it is essential that the underlying accounting records are up to date and accurate as at the relevant period end. Since the business of Max Wrench is rather small in scale, it is advisable for Max Wrench to sub-contract his management accounting to Gerald Sim & Partners. Accounts will be managed in this way: Input of source documents Documents classified Data entered into relevant journals Accounting reports (Profit & Loss etc) Processing of data Posting to ledgers These stages of process will involve creation of General Ledger, Purchases Journal, Sales Journal, Accounts Payable and Receivable Ledgers and the Cash Journal. ...read more.

Conclusion

* Update the accounting records frequently; at least monthly * Keep all applicable vouchers for the minimum period. As we have observed, one of Max's employees is only a part-timer and it is therefore even more necessary that we take measures to prevent fraud or theft within the business. Regulations should be put in place to allocate tasks and authority within the company. For example, credit should only be given to approved customers, who should be present while receiving stock, stock received must tally with suppliers' invoice etc,. Cash balances should also be checked daily to reconcile with all supporting documents. Max and neither of his employees are trained accountants and it would be extremely difficult for him to maintain highly detailed accounting ledgers and journals, therefore it is best advised that he sub-contract his accounting tasks. At the same time, he has to maintain proper accounting records of all business transactions and practice good housekeeping. With a good cooperation with Gerald Sim & Partners, the steadfast growth of his company is almost assured. ?? ?? ?? ?? Gerald Sim & Partners "Accounting for You" ...read more.

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